The Federal Government is Making Your Commute Worse

There are a lot of reasons to be frustrated with the gridlocked federal government, but when it comes to transportation, this headline probably hits home the hardest. And it is the primary claim of a report released today, Subsidizing Congestion, by TransitCenter and The Frontier Group, that describes the numerous ways in which a relatively obscure U.S. tax policy impacts commuters.

The commuter tax benefit is a subsidy that allows employees to withhold money from their paychecks, tax-free, to spend on transit usage, parking fees, and other commute-related expenses.

From 2009 through 2013, the benefit was equal for all employees regardless of whether they drove or took transit. About a year ago, however, Congress decreased the cap on transit benefits from $245 to $130 per month. At the same time, the cap was increased for drivers, capped at $250 per month.

This disparity has resulted in a policy that incentivizes driving, and is, according to the TransitCenter report, “counter to the nation’s overall transportation goals.” Specifically, this policy results in the following negative effects:

subsidizes traffic congestion.

By incentivizing driving over transit usage, the policy adds some 820,000 more cars on America’s most congested roads in its most congested cities.

provides the greatest tax benefit to those with the least need.

The subsidy provides the greatest benefit to the wealthy and to people who work in dense employment centers – that is, in places already prone to congestion.

costs $7.3 billion in reduced tax revenues.

The parking subsidy costs more than $7 billion in tax revenues. Tony Dutzik, Senior Policy Analyst at The Frontier Group, said that while only one-third of Americans benefit from the parking subsidy, “everyone pays in the form of more congestion and an increased tax burden.”

To that end, the authors of the report suggest that the federal government eliminate the parking benefit. At the very least, the report recommends that Congress restore parity – an equal monthly benefit amount – between the parking and transit benefits.

The report also recommends that the government explore improvements to the current transit benefits, such as refundable tax credits.

David Bragdon, executive director of TransitCenter, said, “The government should update its tax incentives to influence travel demand so that they fit the needs of today’s commuters.”